A bill coming before the Frederick County Council next week will seek approval for access to up to a $100 million line of credit for a “worst case scenario” for fiscal year 2021.

Finance Director Lori Depies said this week she hopes the county never has to access that line, but added it would give her and others access to cash, in case state income tax and property tax payments are delayed. The county was also able to lock in to a good interest rate, Depies said.

The county worked with J.P. Morgan to establish a year-long agreement — pending the County Council’s approval — for access to up to the $100 million line of credit, Depies said. The county initially asked for up to $75 million, but J.P. Morgan was willing to offer an extra $25 million if needed.

“My biggest concern ... was that the credit facilities are drying up,” Depies said. “Banks do not have the capital to lend. They’re lending it out to private businesses. Our financial adviser has let us know that we’re one of the only counties in Maryland that have sought out a line of credit, and it’s probably great that we’ve done that. Because when you need cash, sometimes, you can’t go out and get it.”

The agreement with J.P. Morgan can be renewed and renegotiated for future years, if needed, Depies said.

Chief Administrative Officer Rick Harcum said the proposal will be introduced to members of the County Council on Tuesday, who will then have a policy discussion on it. A final vote is scheduled for the following week.

Vivian Laxton, a spokeswoman for County Executive Jan Gardner, said the public will be able to comment on it via email or by calling in live on-air during normal commenting periods, starting Tuesday.

Depies said she needs the legislation to be expedited versus the normal process for County Council bills — introducing, holding a public hearing and voting over a span of several weeks — in order to lock in the agreement with J.P. Morgan and allow the county to access cash fast, in case it’s needed.

The legislation can be expedited because of Gov. Larry Hogan’s executive orders and declaration of a state emergency, The Frederick News-Post previously reported. That ability ends when the state of emergency is lifted.

The request is different because other borrowing proposals the county has used in the past have been for capital projects, Depies said. The $100 million would be for working capital: payroll, accountable payable, debt service and any other operating expenses not related to capital projects.

“We might not need this, I hope we never do,” Depies said. “But it’s a dire circumstance and I want to have it to meet payroll.”

Harcum said it’s also important to have the credit line available because many Marylanders may be wanting to file their income taxes, because of the federal extension from April 15 to July 15.

It also was important to separate the line of credit discussion from the county’s overall budget process, Harcum said.

“The budget is different: the budget is assuming that income tax revenue will come in at the rate we’ve projected. This is if there is a lag, or there is a delay in the actual cash showing up,” he said.

Council Vice President Michael Blue said he was waiting to hear more from Harcum, Depies and other council members Tuesday about the proposal.

But he did say Depies’ concerns about access to credit, and the availability of credit during the pandemic was valid.

“Those are all valid concerns, I think shared by everybody,” Blue said. “And I think if we can get in line ahead of other municipalities, that’s a good thing.”

Council President M.C. Keegan-Ayer also wanted to hear more from county officials, but understood the argument to access a line of credit.

“I do read the [newspaper] business page so I do know a lot of businesses and organizations are trying to do what this is proposing to do,” Keegan-Ayer said. “From a business perspective, this makes sense, but exactly what they plan to do with it, and where they plan to use it, is what I’m interested in.”

More Information

The meeting can be accessed through the public portal system at FrederickCountyMD.gov/CouncilMeetings or by calling toll-free 855-925-2801 and entering meeting code 8365. The meeting begins at 4:30 p.m. Tuesday.

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Steve Bohnel is the county government reporter for the Frederick News-Post. He can be reached at sbohnel@newspost.com. He graduated from Temple University, with a journalism degree in May 2017, and is a die-hard Everton F.C. fan.

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(18) comments

Many states and municipalities are beginning to plan for across the board cuts to workers pensions, current employees salaries and benefits to offset C19. I understand the urge by many Republicans to build a wall, limiting voters access, cutting SS and Medicare, and pulling the teeth out of the EPA but republicans abandoning our first responders while giving bailouts to billionaires is unprecedented. Republicans claim they back the Blue just not their salaries or pensions.

Unless the state of MD receives a billion dollar bailout or hikes taxes significantly it can’t meet its financial obligations. We are beyond debating fiscal austerity to deal with C19 we need the federal government to rescue states that are suffering from unprecedented economic chaos. If the state of MD is allowed to drift into insolvency Frederick County will go bankrupt in short order.

Once this credit line is secured, I wonder what will constitute an emergency in the minds of the council. Remember they are also angling to shorten the legislative process to one day in the event of an emergency. Seems like a dangerous combination to me. Didn't they just vote to raise our property taxes?

This is smart, but the devil is in the details. How much money is JP Morgan charging for this line, what is the interest rate, what is the term? We are closing Monday on a home equity line for the same reason, but we are paying no closing costs and aren't drawing on it.

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